Components of a statement of financial position:

Cards (101)

  • What is another name for the statement of financial position?
    Balance sheet
  • Equity represents the owner's stake in the business.

    True
  • Steps in analyzing a sample statement of financial position:
    1️⃣ Review the components
    2️⃣ Understand the equation
    3️⃣ Calculate equity if necessary
    4️⃣ Assess financial health
  • Equity represents the business's net worth
  • In the basic accounting equation, equity represents the owners' stake in the business
  • What does equity represent in a business?
    Net worth
  • The basic accounting equation states that assets equal liabilities plus equity.
    True
  • Equity represents the owners' stake in the business.

    True
  • Non-current assets are held for long-term use to provide operational benefits.

    True
  • Liabilities represent what a business owes to external parties.
    True
  • Current liabilities are obligations that must be paid within one year
  • Share capital represents the amount invested by shareholders in exchange for shares.

    True
  • Match the component of equity with its definition:
    Share Capital ↔️ Amount invested by shareholders
    Retained Earnings ↔️ Profits kept and reinvested
  • The statement of financial position adheres to the basic accounting equation.

    True
  • The basic accounting equation states that a business's assets are equal to the sum of its liabilities and equity.
  • Assets are what a business owns and can use to generate future economic benefits.
  • Match the asset category with its example:
    Current Assets ↔️ Cash
    Non-Current Assets ↔️ Property
  • Match the liability type with its example:
    Current Liabilities ↔️ Accounts payable
    Non-Current Liabilities ↔️ Long-term loans
  • Match the liability type with its definition:
    Current Liabilities ↔️ Obligations paid within one year
    Non-Current Liabilities ↔️ Obligations due beyond one year
  • Match the equity component with its definition:
    Share Capital ↔️ Amount invested by shareholders
    Retained Earnings ↔️ Profits kept by the company
  • Steps for preparing a statement of financial position
    1️⃣ Identify assets
    2️⃣ Identify liabilities
    3️⃣ Calculate equity
    4️⃣ Ensure the accounting equation balances
  • The basic accounting equation is Assets=Assets =LiabilitiesEquity Liabilities - Equity.

    False
  • The statement of financial position shows a business's financial position over a period of time.
    False
  • Equity represents the business's net worth, which is the difference between its assets and liabilities.

    True
  • The basic accounting equation is Liabilities=Liabilities =Assets+ Assets +Equity Equity.

    False
  • Liabilities are obligations a business owes to external parties.
    True
  • Non-current assets cannot be converted to cash within one year.

    True
  • Non-current assets are held for short-term use and quick conversion to cash.
    False
  • Current liabilities must be paid within one year.

    True
  • What is the time frame for current liabilities?
    Within one year
  • What are three examples of non-current liabilities?
    Long-term loans, bonds payable, deferred tax liabilities
  • What is share capital in equity?
    Money invested by shareholders
  • What is the importance of liabilities in the accounting equation?
    Represents financial obligations
  • What do liabilities represent in the statement of financial position?
    What the business owes
  • What does the relationship between assets, liabilities, and equity ensure in the balance sheet?
    It always balances
  • What does the statement of financial position show at a specific point in time?
    Assets, liabilities, and equity
  • What do liabilities represent in the basic accounting equation?
    Obligations to external parties
  • What is the key difference between current and non-current assets?
    Liquidity
  • Liabilities represent what the business owes to external parties.

    True
  • The balance sheet provides a snapshot of the business's financial position